Posco supplying majority of UPI feedstock

LOS ANGELES  The South Korean parent of USS-Posco Industries Inc. (UPI) has "stepped up" to supply a majority of feedstock to the West Coast flat-rolled producer, which also is charging a premium for its products made from domestic hot bands, according to a company spokesman.

Posco Ltd. now supplies the majority of hot bands being converted by the Pittsburg, Calif.-based producer, a UPI spokesman said, confirming market reports but declining to disclose the percentage being shipped by the Korean mill. Traditionally, Posco and its partner, U.S. Steel Corp., each provided 50 percent of UPIs bands.

However, the UPI spokesman noted the change doesnt signal any retrenchment by UPI, which is considered one of the West Coasts two major flat-rolled producers along with California Steel Industries Inc., Fontana, Calif.

"Were not cutting anything back. The two companies have committed to supplying our full needs," the spokesman said. "Were at full supply."

In fact, he said, UPI expects to ship more than 1 million tons of steel in 2014, more than last year. Its products include hot-rolled pickled and oiled, cold-rolled and galvanized sheet, as well as tin mill products.

UPI doesnt disclose the formula on which it purchases bands from its owners, but outsiders believe it may be based in part on the CRU Group index, which at recent levels could make it difficult for Pittsburgh-based U.S. Steel to ship bands from Fairfield, Ala., Granite City, Ill., and Gary, Ind., to the West Coast for conversion on an economic basis.

"Theyve stepped up to the plate," the spokesman said about UPIs Korean partner assuming a larger supply role. "We have shipments coming in every single month."

Meanwhile, for steel buyers who require a domestically melted band due to Buy America requirements, UPI has begun charging a $45-per-ton premium for the material.

"The customer has to make a decision" if it needs domestic-melt material, the company spokesman said.

Some outsiders think this policy has pushed galvanized business in particular to other millsand helped spur speculation that UPI is retreating, especially in this product. But the spokesman said the West Coast mill is enjoying strong galvanized business, noting that UPI was expecting this week to close out its March order book for galvanized. Output has been estimated by market sources at more than 30,000 tons per month.

UPIs supply contracts with its owners allow it to procure third-party bands, the spokesman noted. It has converted bands from certain outside mills, whose identity it declines to disclose, on a trial basis.

Finding a major source of third-party bands in todays environment is seen by market sources as challenging, with little domestic availability. Moreover, in order for UPI to realize its optimum efficiency, it needs large coils of around 60,000 pounds rated at 1,100 to 1,200 pounds per square inch of width.